7% interest on savings accounts helps smaller banks gain

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/7-interest-on-savings-accounts-helps-smaller-banks-gain/articleshow/15987071.cms

Large banks may have refused to revise their interest rates on savings deposits, but there are clear signs that small banks that have raised interest rates have gained significantly. 

Since the deregulation of savings deposit interest rate in October 2011, five private banks, 10 foreign banks and a co-operative bank have increased their savings deposit rate in the range of 100-500 basis points so far, according to RBI data. These banks have increased their share of savings bank deposits in the banking system from 1.8% to 2.1% in the post-deregulation period up to July 2012. 

Neither large PSU banks like the SBI nor private lenders such as HDFC Bank and ICICI Bank have revised rates from 4%, which was mandated earlier. All these large banks say that they have not lost out on deposits. 

Mobile banking set to become user-friendly

http://www.thehindubusinessline.com/industry-and-economy/banking/article3836573.ece

Banking transactions on mobile phones are set to become easier in a few days time.

You will just need to key in the service code ‘*99#’ in your mobile to initiate funds transfer and check the balance in your bank account.

To begin with, about 20 banks will offer the service code based mobile banking facility to customers who are subscribers of Mahanagar Telephone Nigam Ltd and Bharat Sanchar Nigam Ltd. State Bank of India, Bank of India, Bank of Baroda, Canara Bank and Union Bank of India will be part of the initial roll-out.

All mobile banking transactions will be routed through the National Payments Corporation of India’s National Financial Switch for ATMs.

The service code based facility will work even on the most basic GSM mobile phone. It does not require users to download any software (application) for mobile banking.

A customer registering with his bank for mobile banking will be given a seven-digit mobile money identifier (MMID) and a mobile personal identification number (MPIN).

To initiate a mobile banking transaction, all that a customer will need to do is key in the ‘*99#’ service code.

Then a prompt will ask the customer to enter the MMID. Next, he has to choose from a menu of banking services — balance enquiry/funds transfer/merchant payment — to complete the transaction.

“Some banks may require customers to key in the second factor authentication (MPIN) only for financial transactions while others may require it for all transactions,” said a senior public sector bank official. The RBI has set a daily transaction cap of Rs 5,000 a customer including funds transfer and purchase of goods/services for mobile banking transactions facilitated by banks without end-to-end encryption.

ICRA concerned over Q1 numbers of Dhanlaxmi Bank

http://www.thehindubusinessline.com/industry-and-economy/banking/article3840111.ece

The “uncertainty” caused by the resignation of one of the statutory auditors of Dhanlaxmi Bank and “concerns over the reported numbers” of financial performance of the first quarter, has led rating agency ICRA to place the bank on ‘rating watch with negative implications’.

“Any material changes in the reported financial numbers may have a negative impact on the credit profile of the bank,” ICRA says.

The bank reported a net loss of Rs 12 crore for the April-June quarter of 2012-13, over a net loss of Rs 86.51 crore in the previous quarter.

ICRA notes that the costs were 1.4 times the income in May, when it had revised the rating of the bank. The “reported capital adequacy” at the end of June stood at 10.36 per cent, it said.

On the BSE today, the Dhanlaxmi Bank shares closed at Rs 45.10.

Kamath disagrees with SBI chief, says CRR not an issue

http://www.thehindubusinessline.com/industry-and-economy/banking/article3839664.ece

ICICI Bank Chairman K.V. Kamath today disagreed with the suggestion of SBI chief Pratip Chaudhuri that the RBI should scrap CRR, saying it is part of the monetary policy and no issue can be made of it.

Asked to comment on the vocal slugfest between Chaudhuri and RBI Deputy Governor K.C. Chakrabarty on the issue, Kamath said in the whole issue of monetary policy, several tools are being used, including Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio.

CRR is the portion of deposits kept by banks with the Reserve Bank on which no interest is paid.

“I think the monetary authority (RBI) in its wisdom uses all these tools as appropriate and that’s what is being done.

This (CRR) is nothing new. India always had a CRR for as long as I can remember and I don’t think honestly (there is) an issue to be made here”, he told reporters.

“You should look at it (CRR) as part of monetary policy that it is exercised and part of it is liquidity policy for the banks”, added Kamath, also non-executive Chairman of Infosys Ltd. Earlier, he addressed the eighth India Innovation Summit, organised by CII.

Last week, the SBI chairman made a strong pitch for the abolition of CRR, saying that keeping required funds with the Reserve Bank without any interest was costing the banking system about Rs 21,000 crore.

Banks may shed Rs 300,000 crores in bulk deposits

http://www.business-standard.com/india/news/banks-may-shed-rs-3-lakh-cr-in-bulk-deposits/484547/

With the government driving banks to reduce dependence on wholesale funds, public sector banks (PSBs) may shed bulk deposits worth Rs 3,00,000 crore ($55 billion) over the next few quarters, according to estimates of Deutsche Bank Securities.

While banks had begun task (to prune bulk deposits) in earnest, the move was fraught with challenges, said public sector bank executives. First, the immediate replacement of bulk money with low-cost funds — current and savings account (Casa) deposits and term deposits is tough. Second, cutting down bulk money might moderate the pace of overall deposits’ mobilisation, a situation banking regulator may not be happy with.

Analysts said this move (fall in bulk deposits) would further moderate the deposit growth. The RBI data show annual deposit growth slowed to 14.3 per cent in August 2012, from 17.4 per cent in March 2012. A senior executive with a Kolkata-based public sector lender said though retail deposits were definitely less volatile, banks would have to continue to give attractive rates to get money. Plus, the change in profile of deposits composition is a gradual process.

SBI launches online credit card application service

http://www.thehindubusinessline.com/industry-and-economy/banking/article3831495.ece

Credit card issuer SBI Cards has launched its online application service Click2Card.

“With the internet and e-commerce boom in India, customers are increasingly looking for financial products online,’’ Kadambi Narahari, CEO, SBI Cards and Payment Services Pvt Ltd, said while launching the service today.

Targeted at the internet-savvy customers across India, Click2Card allows customers to enter their details on a secure web interface.

The customer can select a credit card from the choices offered. The interactive platform intuitively advises applicants on the credit card best suited for their lifestyle.

Customer’s application for a credit card is approved, declined or referred on the basis of the credit history with the credit bureau and the SBI Cards risk and policy norms.

The customer is updated on the status of his/her request instantly. For all approved or referred applications, the system sends back a “soft” approval (approval in principle) and the assigned credit limit.

RBI to launch Rs 1,000 notes with rupee symbol

http://www.financialexpress.com/news/rbi-to-launch-rs-1-000-notes-with-rupee-symbol/994327/

RBI today said it will soon launch Rs 1,000 denomination banknotes with rupee symbol, and improved security features.

"The Reserve Bank of India will shortly issue Rs 1,000 denomination banknotes incorporating rupee symbol, with inset letter 'L', in both the numbering panels, in the Mahatma Gandhi Series-2005 with improved security features," RBI said in a notification.

These banknotes will bear the signature of RBI governor D Subbarao and the year of printing 2012 will be on the reverse of the banknote, it added. The design of these notes to be issued will be similar in all respects to the Rs 1,000 banknotes in Mahatma Gandhi Series-2005.

"All the banknotes in the denomination of Rs 1,000 issued by the Bank (RBI) in the past will continue to be legal tender," RBI said.

Clerical cadre prone to higher attrition

http://www.thehindubusinessline.com/industry-and-economy/banking/article3824640.ece

Banks put out impressive recruitment figures in their annual reports. But have you ever thought about the attrition rate in these banks? Shocking but true, in some cases, almost half of those who joined had left within a year.

The clerical cadre has been witnessing high attrition, especially in banks with a regional focus. Bank unions say the attrition rate is nearly 30 per cent in both the officer and clerical cadres.

D.N. Prakash, President of Corporation Bank Officers’ Organisation, said that the attrition level in the clerical cadre was as high as 45 per cent in a bank at one point of time.

Ask for the reasons, and you get several of them.

According to Prakash, some banks have branches only in particular geographical locations, unlike big public sector banks such as State Bank that have branches across the country. Some of the South-based banks have less presence in the northern region, but most of the new recruits in these banks are from the North. The banks find it difficult to place the new employees in States of their choice. This is one of the reasons why most of them don’t stick on for more than a year.

P. R. Karanth, Joint Secretary of AIBEA, says that someone who joins bank ‘A’ in the clerical cadre usually gets a good offer from bank ‘B’ in the officer cadre after two-three years. Even if the banks impose any bond during their appointment, they are ready to pay and leave.

To address this, K.S. Bhat, Secretary of the Syndicate Bank Staff Association, said that weightage should be given to those who work in bank ‘A’ while filling vacancies in the officer cadre.

He said a person from clerical cadre had passed IBPS with 167 marks in his bank. But the cut-off for officers’ cadre was 168 marks. But he got an officers job in bank ‘B’, where he matched the cut-off marks.

Some relaxation for the existing staff would have helped his bank to retain him. “In this process, we lost a clerical staffer and a person with two years’ experience,” he said.

Bhat said that in some States a lower division clerk in a government office gets a better salary than a bank clerk. Compared to banks, the workload and risks in some government offices are lower.

Suggested directives for public sector banks - Non-Performing Staff (NPS)

http://www.thehindubusinessline.com/industry-and-economy/banking/article3824641.ece

Just like non-performing assets (NPAs), there is a proposal to calculate the percentage of non-performing staff (NPS) . This is one of the recommendations of a committee appointed under the chairmanship of a former CMD of a bank.

All staff who have secured less than 50 per cent in their annual appraisal for three years in a row will be classified as NPS.

This number divided by the total number of staff will give the gross NPS ratio.

This should be one of the parameters to be taken into account while fixing the incentive for the Chairman/Executive Directors.

Take more risks, increase credit flow to larger number of people: RBI

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/take-more-risks-increase-credit-flow-to-larger-number-of-people-rbi-to-banks/articleshow/15831662.cms

Banks need to increase credit flow to cover larger number of people as only 10 per cent of people in the country have access to bank loans,Reserve Bank Deputy Governor K C Chakrabarty said here today.

"Banks have to take more risk. Look in our country today, access to credit is only 10 per cent. You have to increase the flow of credit to a larger number of people," Chakrabarty told reporters near here.

"What we are feeling is that banks are not comfortable taking risks. The issue is not risk aversion. The issue is managing the risk. Risk management means minimise the risk. It is minimise the risk for a given return or with a given risk, maximise the return," he said.

He said that once banks take more risk on giving access to credit, it meant they were doing more business.

SBI management mulling working Sundays to improve efficiency

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/sbi-management-mulling-working-sundays-to-improve-efficiency/articleshow/15750882.cms

Country's largest lender State Bank of Indiamay have its branches open on Sundays to help improve efficiency, a top bank official has said. 

"Possibly we would like to see Sunday working which would increase the time available for doing banking and increase the business," bank chairman Pratip Chaudhuri told analysts on a conference call organised by the brokerage Edelweiss Securities. 

The bank had last year taken everybody by surprise by opting to keep all its branches open on October 2 to compensate for a day's business loss due to a technical snag. The bank management was happy with the foot falls and the staff turnout at the branches at that time in spite of it being a Sunday as well as a national holiday - Gandhi Jayanti. 

Notably, many private banks, which control only a minority share in the banking operations, do keep their select branches open on Sundays for customer convenience, even though technologies like internet banking have reduced the need. 

Being open on Sundays is said to help the branches attract the new-age working class customers where both the spouses in a household work and struggle to do banking transactions during the week. 

SBI, which has almost 14,000 branches across the country, counts on its large chunk of savings account deposits (at over 38 percent) for higher margins. 

However, if such a move were to be made, it would be interesting how the bank unions, which had crippled banking operations across country last week protesting reform measures, take to such a proposal. 

Union Bank plans to increase branches to 3,500,ATMS to 5,000

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/union-bank-plans-to-increase-branches-to-3500atms-to-5000/articleshow/15633276.cms#

Chennai:

State-owned Union Bank of India today said it plans to expand its domestic and international presence by increasing number of branches and ATMs by this fiscal-end. 

"We plan to increase our branches from around 3,200 to 3,500 and the ATMs by 5,000 from the present 4,000-odd, both by March, 2013," Union Bank Chairman and Managing Director D Sarkar told reporters here. 

Sarkar was here to inaugurate the bank's 161st 'Union Xperience' branch, which involves a better ambience and more automation, and touted as a 'flagship project'.

On the latest Xperience branch inaugurated here, he said it will have a round-the-clock Self Service Lobby with various automation machines like self-service passbook printer, cheque deposit machine and phone banking terminal. 

Now, Internet to rule at ICICI Bank

http://www.financialexpress.com/news/now-internet-to-rule-at-icici-bank/992207/0

The country's third largest lender by assets, ICICI Bank today said Internet-based transactions have grown to constitute a third of its total and the segment may grow to become the largest channel in future.

"More than one third of our transactions take place through Internet, making it the second most used medium. With the increase in Internet usage, it may also grow to occupy the number one position," the bank's chief executive and managing director Chanda Kochhar told.

She said handheld devices like mobile phones and tablets segment, which is growing at over 100 percent every year as compared to the 20 percent growth in desktops, will help drive this growth.

The bank, the country's largest private sector lender, today launched a slew of products like an electronic branch which will do all the operations of a branch across the clock, tablet-based banking which will fasten account opening, a better point of sale terminal which can conduct a host of transactions and an e-locker for storing important documents.

SBI chairman Pratip Chaudhuri for abolition of cash reserve ratio

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/sbi-chairman-pratip-chaudhuri-for-abolition-of-cash-reserve-ratio/articleshow/15618689.cms

State Bank of India Chairman Pratip Chaudhuri today made a strong pitch for the abolition of cash reserve ratio (CRR), saying that keeping required funds with the Reserve Bank without any interest was costing the banking system about Rs 21,000 crore. 

RBI should either do away with CRR or compensate the banks for the losses incurred as the banking system was not earning any interest on it, Chaudhuri told reporters on the sidelines of Ficci Banking Conclave here. 

"CRR does not help anybody and it is unfairly put on the banks. Why is CRR not applied to insurance and other companies who are mobilising deposits from the public?" he asked. 

CRR, he said, should be phased out within a reasonable time-frame. "Phasing out of CRR would release scarce capital resources which will help the banks in reducing rates for the industry." 

Banks are required to keep 4.75 per cent of their deposits with RBI. 

Chaudhuri said the other option was to increase the SLR, on lines of CRR percentage. Banks earn interest on SLR deposits. 

About losses incurred by the banking system for keeping interest-free CRR deposits, Chaudhuri said it was around Rs 21,000 crore for the entire industry and Rs 3,500 crore for SBI

RBI bats for more FDI in retail, insurance and aviation

http://www.thehindubusinessline.com/industry-and-economy/banking/article3812634.ece

The Reserve Bank of India said there is a need to further improve foreign direct investment (FDI) inflows in sectors such as insurance, retail, aviation and urban infrastructure.

The central bank, which has made this suggestion in its Annual Report for 2011-12, said this will augment non-debt creating flows and keep the composition of India’s external liabilities at a comfortable level.

On the apprehensions over FDI in multi-brand retail, the RBI said international experience on the whole suggests that allowing FDI in retailing space leads to increased competition.

Empirical evidence also suggests that increased competition in retail space results in lower prices, which improves consumer welfare, benefiting low-income households the most.

The RBI said FDI in retail may be particularly helpful in improving supply chain management through greater investment in backend infrastructure, including cold storage for farm and poultry products.

Non-debt creating flows need to be augmented. This is because increasing recourse to debt flows and drawdown of foreign exchange reserves to finance the current account deficit led to various external sector vulnerability indicators deterioration considerably in 2011-12.

Current account deficit (CAD) arises when a country's total imports of goods, services and transfers’ is greater than exports.

Poor KYC drill lands 3 banks in Net frauds - Karnataka

http://www.thehindubusinessline.com/industry-and-economy/banking/article3812271.ece

Lack of due diligence at the time of opening two new accounts cost at least two banks in the State a few lakh rupees in 2011-12, according to the banking ombudsman for Karnataka.

Without naming the banks or whether they were in the public or private sector, M. Palaniswamy told a news conference on Thursday that because of lack of vigil, fraudsters had opened fake accounts in three banks in Karnataka. They siphoned off money from the accounts of two customers via the Web.

They remain untraced as they had given fake details in the banks’ KYC (know your customer) drill and the banks had failed to verify them.

RBI’s banking ombudsman awarded the compensation to the victims in two of these Net banking frauds. The third is pending.

However, in the last two years, banks have got wiser to Net frauds. They are placing strong three-layered firewalls, suspending e- and mobile banking facilities of suspects and complying with the RBI’s stern directives.

Net frauds per month had come down to 2-3 cases. “We are hitting them hard. Banks also face penalty for non-compliance,” he said.

Palaniswamy said his 20-member team received 3,647 complaints of bank customers during the period from July 2011 to June 2012. Of them 3563 were resolved or dismissed and 84 were carried over into the current year.

“The number has increased marginally compared to 3,470 complaints received in 2010-11,” he said, adding that the Karnataka scene was much better than in Kolkata or Mumbai.

There were fewer problems related to ATM transactions compared to 2009-10 and 2010-11. It must be because banks have largely stabilised their ATM networks and also customers have got used to the system, he observed.

There were 30 complaints about education loans, higher than earlier perhaps because those students had missed the small print. There were 732 cases related to credit and debit cards; 446 about loans and advances; 287 cases on deposit accounts and 113 pension cases.

Rs 4,000-cr capital infusion on cards: SBI chief

http://www.thehindubusinessline.com/industry-and-economy/banking/article3812582.ece

State Bank of India expects Rs 4,000 crore capital infusion from the Union Government this fiscal. The bank will be discussing the matter with the Government this week, said Pratip Chaudhuri, Chairman, SBI.

The bank had earlier this year received close to Rs 8,000 crore from the Government.

“They (the Government) have called us for a meeting which should happen this week, and possibly another Rs 4,000 crore looks to be on the horizon,” he said.

As on June 30, 2012, the bank’s capital adequacy ratio stood at 13.17 per cent.

According to Chaudhuri, NPA (non-performing asset) concerns were slightly overplayed. “We should not see ghosts in NPAs,” he said, and added SBI has already taken several measures to bring down its NPAs.

“We are asking companies having non-core assets to sell them and bring the cash. If the company is short of capital, we are asking them to get some private equity or get equity investors, and if the company is asset free and cash poor, we are positioning more loans,” he said.

Recently, SBI appointed 20 credit appraisal experts from leading public sector companies to deal with the technical aspects of its new projects.

Pakistanis can buy shares, debentures of Indian cos: RBI

http://www.thehindubusinessline.com/industry-and-economy/banking/article3808127.ece

The Reserve Bank of India on Wednesday said a citizen of Pakistan or an entity incorporated in that country may, with the prior approval of the Government of India’s Foreign Investment Promotion Board, purchase shares and convertible debentures of an Indian company under the Foreign Direct Investment Scheme. 

FDI is, however, not permitted in sectors/activities pertaining to defence, space and atomic energy and sectors/activities prohibited for foreign investment.

IDBI Bank rolls out floating rate term deposit

http://www.thehindubusinessline.com/industry-and-economy/banking/article3807560.ece

IDBI Bank has launched a floating interest rate retail term deposit (FRTD).

The rate of interest on the FRTD will move in tandem with a reference rate, which is the average yield at the 364-Days Treasury Bills auctions undertaken by the Reserve Bank of India (RBI) during the preceding three months.

“The interest rate in case of FRTD is anchored to a transparent, market-based rupee benchmark rate,” said the bank. The interest rate on FRTD would be reset every calendar quarter.

The minimum amount of deposit under FRTD will be Rs 10,000 and thereafter in multiples of Rs 1,000 with a cap of Rs 1 crore. The FRTD would have a lock-in period of one year and would be accepted in six maturity slabs, ranging from one year to ten years.

Govt now wants competition watchdog to okay bank mergers

http://www.thehindubusinessline.com/industry-and-economy/banking/article3808293.ece

In a policy U-turn, the UPA Government has decided to bring bank mergers within the purview of the Competition Commission of India (CCI).

It has now decided to drop a proposal in the Banking Laws (Amendment) Bill that would have taken bank mergers out of the ambit of the competition panel, a top Finance Ministry official said.

This will come as a setback for the Reserve Bank of India (RBI), which had wanted bank mergers kept out of the competition watchdog’s ambit. This new thinking on bank mergers comes soon after the change of guard at the Finance Ministry where P. Chidambaram has taken charge.

If this decision is enacted into law, the RBI will not have the last word on bank mergers and acquisitions.

The current thinking in the Finance Ministry is that the CCI, as competition watchdog, should get to approve merger transactions in all sectors, including banking, and that there should be no carve-outs or exceptions. Simply put, banks will have to take the panel’s approval before going ahead with any merger or forced amalgamation transaction.

All bank mergers will come under the scrutiny of the competition watchdog. Ever since the RBI, as banking regulator, made a pitch for exempting bank mergers from the Commission’s scrutiny, there have been similar demands from other sectors, especially those such as telecom that have their own regulators.

Insurance and shipping players had also reportedly lobbied through their ministries seeking to be exempted from the panel’s scrutiny.

State Bank of India, Bank of India allowed to operate in Pakistan

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/state-bank-of-india-bank-of-india-allowed-to-operate-in-pakistan/articleshow/15603487.cms

India and Pakistan have agreed to allow two banks each from both the countries to set up branches across the border, Governor of the State Bank of Pakistan, Yaseen Anwar said today.

The two Indian banks that will be allowed to operate in Pakistan are State Bank of India (SBI) and Bank of India ( BoI).

On the other hand, quasi-state owned National Bank of Pakistan and privately-owned United Bank Ltd. will be running full-banking operations across the border, once licensed by India.

Meanwhile, officials from the Bank of India in Singapore have recently visited Karachi for setting up an office in Pakistan, said Syed Hasan Javed, Pakistan High Commissioner to Singapore.

Bihar Govt not to deposit funds in 21 banks

http://www.thehindubusinessline.com/industry-and-economy/banking/article3803402.ece

Bihar government has decided against depositing funds in 21 public and private sector banks for their failure to provide loans to borrowers on the four-point criteria, Deputy Chief Minister Sushil Kumar Modi said today.

These 21 banks, including Axis Bank and ICICI Bank, have scored qualification marks of 25 points out of 100 fixed by the State Government to assess their performance in lending on criteria like credit deposit ratio, primary sector lending, agriculture sector lending and Kisan Credit Card, he told reporters at the sidelines of his weekly ‘Janata Durbar’.

As many as 13 banks scored zero, while the rest scored between 7 and 23 and failed to meet the State Government’s requirement on lending by the banking institutions to the borrowers in Bihar in 2011-12, he said.

The State Government had, therefore, decided against making deposits in these 21 banks till further orders and to withdraw its funds from these banks, Sushil Kumar Modi, who also holds the Finance portfolio, said.

Soon, a bank-wide portal that will allow you to shop for best service

http://www.thehindubusinessline.com/industry-and-economy/banking/article3799975.ece

How convenient it would be to compare at one place interest rates on deposits offered by various banks, their retail loan rates, margin amounts they require, the processing fees they charge, the add-on facilities they offer on deposits, and so on.

Extremely. The Finance Ministry also thinks so, and wants public sector banks,a la travel portals such as cleartrip, makemytrip, yatra and expedia, to explore the feasibility of setting up a bank-wide portal.

These online travel portals allow travellers the convenience of comparing the fares quoted by various airlines so that they can buy the cheapest ticket plus the various add-ons such as hotel rooms and airport pick-up.

As things stand now, customers seeking a higher return on their investible surplus, or the cheapest home, car or personal loan, have to either go to the branches of various banks or surf their individual Web sites.

No mean task as there are 26 public sector banks, including the five associate banks of State Bank of India.

A more discerning customer may widen his search to the 23 private sector banks too.

Lok Sabha to decide on Banking Act changes; more powers for RBI likely

http://www.thehindubusinessline.com/industry-and-economy/banking/article3795894.ece

The almost seven-year wait for amending the Banking Regulation Act is likely to end on Wednesday, when the Lok Sabha will take up amendments in the Banking Regulation Act for consideration and passage. This is one of three financial sector Bills aimed at ushering in a new phase of reforms.

The Lok Sabha’s list of business for August 22 states that Finance Minister P Chidambaram will move the Banking Laws (Amendment) Bill 2011 to amend the Banking Regulation Act, 1949, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.India Inc is keenly awaiting passage of this Bill as this will push the Reserve Bank of India to issue new banking licences.

Enactment of this Bill will provide new powers to the central bank. It proposes to confer upon the Reserve Bank the power to call for information and returns from the associate enterprises of banking companies, and also to inspect the same, if necessary.The Bill also proposes to empower the Reserve Bank to supersede the board of directors of a banking company for a total period not exceeding 12 months, and appoint an administrator to manage the banking company during the said period. The RBI feels that such power will help it in regulating new as well as existing entities in a better manner.

Another key feature of the Bill is increasing the voting rights. The Bill had originally proposed raising the ceiling on voting rights of shareholders of nationalised banks to 10 per cent from 1 per cent.

For private sector banks, the Bill talked about removing the existing restriction on voting rights limited to 10 per cent of the total voting rights of all the shareholders. However, it is believed that the Government has accepted the Standing Committee’s recommendation of increasing the limit of voting rights to 26 per cent from the existing 10 per cent.

RBI move on group exposure will affect banks: Moody’s

http://www.thehindubusinessline.com/industry-and-economy/banking/article3799347.ece

SBI and ICICI Bank are among those that would be affected if RBI implements its proposed guidelines on banks’ exposure to their group entities, global credit rating agency Moody’s said today.

Last week, the RBI released draft guidelines to limit banks’ exposure to their own group non-financial and financial entities.

As per Moody’s, the proposed rules would hurt companies that depend on parent banks for capital and brand support, particularly those with large international operations, or those that operate insurance, securities or asset management businesses that need capital and liquidity support to meet their business needs.

“If the RBI adopts them, the new guidelines would be credit positive for India’s banks, but credit negative for group companies that rely on parent banks for capital and brand support,” Moody’s Investors Service said in a report.

It said the “affected banks” include ICICI Bank, State Bank of India, Bank of India, Bank of Baroda and Kotak Mahindra Bank.

Union Bank to seek Rs 950-1,000 crore from government

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/union-bank-to-seek-rs-950-1000-crore-from-government/articleshow/15517109.cms

Union Bank of India will seek around Rs 950-1,000 crore capital from the government, a top bank official said. 

"We are comfortable with the present capital situation of the bank. Our capital adequacy ratio is at 12 per cent. But to support growth in business, we will approach the government for fresh capital infusion to the tune of Rs 950 crore to Rs 1,000 crore," the bank's CMD D Sarkar told reporters on the sidelines of Ficci Banking Conclave.

He said the bank is expecting a business growth of 18 per cent to 19 per cent, while advances and deposits to grow by 18 per cent and 15 per cent, respectively. 

During the first quarter of the current fiscal, gross NPA of the bank stood at 3.6 per cent, he said. 

Sarkar said that the bank was contemplating to start full-fledged banking operations in Dubai, Abu Dhabi, London, Sydney and Brussels.

Banks not liable to book-profit tax: Tribunal

http://www.thehindubusinessline.com/industry-and-economy/banking/article3776059.ece

A bank may be a company but since it is mandated to prepare its accounts in accordance with the Banking Regulation Act, 1949 and not in accordance with Schedule VI of the Companies Act, 1956, it is not required to pay minimum tax on its book profits.

This was the verdict of the Bangalore Income-tax Appellate Tribunal in Canara Bank v. CIT for the assessment year 2005-6.

Section 115JB of the Income-tax Act extracts a minimum tax at the prescribed rate on the book profits where a company’s tax on total income computed under the income-tax law is lesser vis-à-vis such book-profit tax. Canara Bank had filed a ‘nil’ return but admittedly had a book profit of Rs 2,900.65 crore which too it declared in its return. The Commissioner had sought to add to its book-profits certain amounts using his revisionary powers under section 263.

Canara Bank taking a cue from two favourable judgments emanating from Kerala High Court and Bombay High Court that section 115JB did not apply to banking companies, mounted a challenge not only to the revisions sought to be made by the Commissioner but more importantly to the core issue, though belatedly — whether a banking company came under the pincer of section 115JB. The Bangalore Tribunal had no hesitation in ruling in favour of the bank in view of the language of section 115JB that targeted companies preparing their accounts according to Schedule VI of the Companies Act, 1956 which by implication bailed out banking companies, among others, that prepared their accounts under other enactments.

Banks plan for lower interest on Bulk Deposits

http://www.thehindubusinessline.com/industry-and-economy/banking/article3776063.ece

Customers may now have to be content with a lower rate of return on bulk deposits parked with banks.

Faced with a daunting task of scaling down the share of bulk deposits (including certificate of deposits) to 15 per cent of total deposits by March 2013, banks are planning to lower interest rates on such deposits.

Banks also plan to approach the Union Government to seek an extended time period to comply with the norms. In a recent move, the Finance Ministry has directed public sector banks to bring down the share of bulk deposits to 15 per cent of their total deposits by March 2013.

The move was taken primarily to improve the banks' profitability and improve their asset-liability management.

Yes Bank - Auto Credit Service to attract low cost deposits

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/yes-bank-launches-auto-credit-service-to-attract-low-cost-deposits/articleshow/15489481.cms

To attract low cost deposits private sector bank Yes Bank on Tuesday launched 'Auto Credit Service'. 

Individual running an account with other banks can earn a higher interest rate of 7 per cent on balances of Rs 100,000 and above - by just submitting a onetime ECS instruction to transfer funds from any of their existing accounts with other banks. 

"After the successful ECS activation, the individual's account with the other bank will be debited on the requested date and funds will be automatically credited to his Yes Bank Account. The individual is not even required to visit his existing bank to activate this service," said the bank in a statement. 

Loans to pharma companies turn bitter pill for banks

http://www.business-standard.com/india/news/loans-to-pharma-companies-turn-bitter-pill-for-banks/483322/

Loans to mid-sized pharmaceutical companies have turned bad for a slew of top public sector banks in the first quarter of this financial year. Some of the large lenders are set to restructure some of these, to avoid more slippage.

North India-based Surya Pharmaceutical Ltd, flagship company of the Rs 1,700-crore Surya Corp, defaulted to State Bank of India, Punjab National Bank, Bank of India and Oriental Bank of Commerce in the quarter.

While SBI had an exposure of Rs 460 crore, the total in this account that has become a non-performing asset (NPA) is close to Rs 1,000 crore.

In the quarter ended June, SBI saw fresh slippage to the tune of Rs 11,000 crore and closed the quarter with an NPA ratio of 4.99 per cent of gross advances.

It has pointed to three accounts, one each in the power, road sector and pharmaceutical sectors, as having contributed significantly to its deteriorating asset quality.

SBI says the power and road sector accounts have a chance of getting upgraded once environmental clearances are in place but they are not sure about the pharma company's turnaround.

Loans to another firm, Orchid Pharmaceutical and Chemicals, also become an NPA for Union Bank of India and Andhra Bank. These banks have an exposure of around Rs 500 crore in all.

While SBI loans to Orchid Chem did not slip to the NPA category in the first quarter, sources indicate the lender might restructure these loans to avoid fresh slippage.

SBI’s total exposure to Orchid is Rs 750 crore, including a foreign currency loan.

A loan, if restructured while the asset is classified as standard, can remain in the latter category but the provisioning requirement rises from 0.4 per cent to two per cent. However, if an NPA is restructured, the asset needs to be further downgraded and provisioning requirements increase sharply.

Proposal to link tax exemption of Life Insurance policies to the term of the cover

http://www.business-standard.com/india/news/tax-break-in-life-insurance-might-be-linked-to-cover-lic-pushes-proposal/483324/

The Union finance ministry is considering a proposal to link tax exemption of life insurance policies to the term of the cover, rather than the sum assured.

The suggestion was mooted by government-owned Life Insurance Corporation of India (LIC).

The largest life insurer has sought that premiums be linked with the term of a policy and any of 10 years or more should get the exemption.

Currently, tax relief is linked to the sum assured. Under the present system, insurance policies, except pension plans, would have to offer a cover of at least 10 times the annual premium to be eligible for tax benefits under sections 80C and 10 (10D) of the income tax rules. 

Earlier, insurance policies with a sum assured of five times the annual premium used to get the tax benefit. Section 80C allows exemption up to Rs 1 lakh and 10 (10D) gives exemption in maturity proceeds.

Insurers have been arguing that the present system would raise premiums, particularly for customers in the higher age groups as they opt for lower term policies where the mortality rates are higher.

RBI plans checks on banks' exposure to group entities

http://www.business-standard.com/india/news/rbi-plans-checksbanks/-exposure-to-group-entities/483323/

The Reserve Bank of India has planned to cap banks’ total exposure to own group entities at 20 per cent of net worth, to avoid concentration and contagion risk from intra-group transactions.

The limit for exposure for a single entity — a non-finance company or an unregulated finance entity — in a group will be five per cent of paid-up capital plus reserves. The draft norms propose a higher exposure limit for a group’s regulated financial services companies.

A bank can have exposure up to 10 per cent of net worth to a single regulated financial services entity of a group. The aggregate group exposure in the case of all non-financial entities and unregulated group finance units is proposed to be capped at 10 per cent of net worth.

Banks are to operate within these limits on an ongoing basis. They should report their exposure, on a quarterly basis. If exposure exceeds the limits, these should be reported without delay and with acceptable rationale. If satisfied, RBI might allow the bank an appropriate timeline to comply with the limits.

Any excess exposure over the limits is to be deducted from the Common Equity Tier-1 capital until the limits are restored, say the draft norms.

RBI might impose penalties andor prohibit a bank from conducting further intra-group transactions if it fails to comply with the timeline to bring exposure within limits. Banks are not to hold unlimited exposures to group entities, either aggregate or at an individual entity level.

They should avoid entering into cross-default clauses where a default by a group entity becomes ground to trigger an obligation for the bank.

Also, banks should not purchase a low-quality asset from group entities. A low-quality asset should not be accepted as collateral for loan or extension of credit or a guarantee issued on behalf of the group entity, goes the proposal.

Banks, post offices may be roped in to sell G-Secs

http://www.thehindubusinessline.com/industry-and-economy/banking/article3772108.ece

Bank branches and post offices could be used as distribution channels to get retail investors to invest in government securities, according to a Reserve Bank of India panel.

Further, investment in government securities (G-Secs) will become attractive for retail investors if the interest rates offered on various small savings instruments are aligned with the rates yields of G-Secs of comparable tenors.

As retail investors currently have to pay large illiquidity premium when they try to sell illiquid securities, the panel said this issue could be addressed by involving primary dealers (PDs) in the market-making mechanism.

New housing scheme for urban poor

http://www.thehindubusinessline.com/news/article3774711.ece

In good news for urban poor, Prime Minister Manmohan Singh today said a housing scheme will soon be launched which will give them relief on interest on loans less than Rs 5 lakh.

Singh also promised that the government will ensure that all households benefit from bank services in the next two years.

Addressing the nation from the ramparts of Red Fort on the occasion of Independence Day, Singh said, “To provide housing for our poor brothers and sisters residing in urban areas of our country we will soon launch the Rajiv Housing Loan Scheme.

“Under this scheme, people belonging to the economically weaker sections would be given relief on interest for housing loans of less than Rs 5 lakh,” Singh said.

Ten years ago, he said, only three out of every ten households in villages were benefiting from banking services but today more than half of the rural households get the benefit of bank accounts. “It will be our endeavour to ensure that all households benefit from bank accounts in the next two years,” he said.

Muthoot Finance aims to double money transfer payouts

http://www.financialexpress.com/section/banking-&-finance/349/

Money transfer player Muthoot Finance Ltd, which accounted for two million payouts to customers last year, aims to double it by next year, a top company official said today.

Muthoot is the largest distributor of remittances after the Post office, company officials said.

About Rs 75,000 crore is coming to India every year by money transfers with Muthoot Finance accounting for 10 per cent of it.

"We want to double this by next year," Bijumon, Chief General Manager and George M George, Executive Director, said.

In Kerala, Muthoot pays out Rs 3,000-4,000 crore every year through its 3,800 money transfer payout centers across the country.

Quarterly numbers: Dhanlaxmi Bank under scanner

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/quarterly-numbers-dhanlaxmi-bank-under-scanner/articleshow/15469149.cms

What's brewing at Dhanlaxmi Bank? The auditors of the old private sector lender have resigned earlier this month following certain differences with the management while the banking regulator suspects that some of the shareholders of DLB are acting in concert. 

The auditors Walker Chandiok & Co - the local audit arm of the management and audit consultancy Grant Thornton - have put a question mark on some of the bank's performance numbers for the quarter ended June 2012. 

Dhanlaxmi CEO & managing director PG Jayakumarsaid that there was no "truth in the statement" and added that the bank had not received any communication from RBI on shareholding issues. 

But, it is believed that the auditors were not comfortable with the sudden spurt reported by the bank in its yield on advance for the June quarter. 

The bank's yield on advances - which simply put, is the ratio between total interest income on advances and average advance outstanding for the period - rose to 13.27% from 11.35% in the previous quarter. A two percentage point rise in yield on advances in a single quarter is very unusual for a bank unless there is a big surge in unsecured loans where interest charges are higher.

The bank's net interest margin-the difference between interest income and interest expenses upon interest earning assets-has increased from 1.53% to 2.50%. Such an improvement in margins is also rare in a quarter simply because it is difficult for a bank to replace high-cost liabilities with cheaper deposits within such a short span. 

SBI might absorb one Associate Bank this year

http://www.business-standard.com/india/news/sbi-might-absorb-one-associate-bank-this-year/483230/

State Bank of India (SBI) is likely to merge one of its five associate banks in the current financial year.

The board of the country’s largest lender has given its approval for the merger, and SBI will now start the process of identifying an associate for the merger.

SBI merged one of its associate, State Bank of Saurashtra, with itself in 2008. State Bank of Indore was merged with SBI in 2010.

According to bank officials, this time the debate is whether the bank would go for a listed entity or an unlisted entity.

Of the five associate banks of SBI, State Bank of Hyderabad (SBH) and State Bank of Patiala are unlisted, while State Bank of Mysore (SBM), State Bank of Travancore (SBT) and State Bank of Bikaner and Jaipur (SBBJ) are listed entities.

Apart from State Bank of Mysore, the others have reported profit growth for the quarter ended June. While SBM’s profit dipped to Rs 40 crore from Rs 64 crore reported during the first quarter of the previous financial year, State Bank of Patiala posted 87 per cent growth in profit, SBBJ’s profit growth was 31 per cent, while SBT and SBH 30 per cent and 18 per cent respectively.